Your Questions Answered: IPT Compliance

As our webinar explored in depth, Insurance Premium Tax (IPT) compliance is complex and constantly evolving.

The Sovos compliance team covered IPT compliance in different countries across Europe and the globe and discussed topics including IPT in Germany, Italy, the UK and Brexit and beyond.

Despite this deep dive, there were plenty of questions that we didn’t have time to answer. We’ve provided answers to these questions in this blog.

Germany IPT

Is it correct that in Germany from January 2022 hulls will be charged at 3% and illness will not be exempt anymore?

For commercial hull insurance for seagoing vessels, the removal of the requirement for vessels to be registered in the German register of shipping companies was made from 10 December 2020. It means that the IPT rate of 3% that has been charged on these “blue water” policies can be applied to other commercial hull policies on seagoing vessels that have been taxed at 19%.

For illness insurance, the IPT exemption on this and other personal insurances such as occupational disability and reduced earning capacity will become more restricted from 1 January 2022. It will only be applicable where the insurance benefits the “person at risk” or close family members directly or indirectly. This means that the existing exemption for corporate entities taking out this cover to protect their financial exposure will be removed.

Italy IPT

If de-registering for IPT in Italy, how easy is it to reclaim the prepayment?

This process is not easy and will take a few years to be completed. Reclaims can be submitted at the time of de-registration, but it could lead to a lengthier procedure with the Italy tax office for the reclaim to be refunded than if the registration is kept open during this time.

What about Freedom of Establishment (FOE) for Italy? Can prepayments be transferred over?

The same rules apply for insurers operating in Italy on either a FOE or Freedom of Services basis. The Italy tax office will need to see evidence of a transfer of the portfolio of the business from one Italian underwriting entity to another, and this is likely to include a notarised and apostilled tax deed, for a prepayment to be transferred over.

As regards Italy, when was the court decision on refunds for no claims bonus adjustments?

This was a decision from the Provincial Tax Commission of Rome in 2020 (3739/2020). At this time, the law says that IPT refunds are not allowed on mid-term adjustments even if the premium is fully or partially returned to the policyholder for any reason and it is too early to say if this will change.

UK IPT

Question regarding Brexit for German insurers: Does a German insurer incur double taxation since the UK is not considered an EEA anymore?

Yes, this is possible if the policyholder is in Germany for policies that are not relating to immovable property, vehicles, and travel. It depends on whether the UK insured entity meets the criteria to be treated as a permanent establishment for German IPT purposes, so a UK branch could be in scope, but a UK subsidiary is not.

We recommend looking at the latest decree issued by the German Federal Ministry of Finance on 7 September 2021 for further information Versicherung von im Drittland belegenen Betriebsstätten (§ 1 Abs. 2 Satz 2 VersStG) (bundesfinanzministerium.de) on the permanent establishment question and whether double taxation can occur.

Does the UK de minimis rule still apply?

Yes, the UK de minimis rule does still apply for any policies where the UK premium relating to a contract is £500,000 or less and the taxable element of the premium relating to the UK is 10% or less.

As a Belgian insurer, concerning the declaration of the payment of the IPT to the UK. Do we still have to collect the IPT from our insured in UK and Northern Ireland, and do we still have to declare a return to the UK tax authority?

Yes, you still need to collect IPT from your insured in the UK.

Northern Ireland is still part of the UK for IPT purposes, and this has not changed with Brexit.

The reporting requirements for insurers writing business in the UK have not changed from what they were up to the end of the transitional period on 31 December 2020.